Czech firearms producer Ceska zbrojovka Group (CZG) has agreed to acquire 100% outstanding equity interest in US-based arms manufacturer Colt Holding.

Under the definitive agreement signed by the companies, the stake is valued for an upfront cash consideration of $220m.

It also involves the issuance of more than one million shares of newly issued CZG common stock.

The agreement offers a possible earnout consideration of up to 1,098,620 shares of newly issued CZG common stock based on the achievement of defined EBITDA thresholds during 2021-23.

Colt Holding is the parent company of American firearms manufacturer ‘Colt’s Manufacturing’ and its Canadian subsidiary ‘Colt Canada’.

CZG president and chairman Lubomír Kovařík said: “We are proud to include Colt, which has stood shoulder-to-shoulder with the US Army for over 175 years, in our portfolio.

“We believe in the successful connection of our corporate cultures, the proven track record of the current management team and the complementary nature of the CZ and Colt brands.

“The combined group will have revenues in excess of $500m and presents a real small arms powerhouse.”

If completed, the latest deal would enable CZG to get significant production capacity in the US and Canada, as well as expand its global customer base.

The transaction is expected to close in the second quarter of this year. It is subject to approval from regulatory authorities.

Colt president and CEO Dennis Veilleux said: “Having completed a historic turn-around of the operations and financial performance at Colt over the past five years, this important next step with CZG positions the company to take advantage of significant growth opportunities.”

In April 2018, the Hungarian Government signed a licence agreement with CZG for a €100m ten-year contract to manufacture small arms for the infantry.